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Calculation of Cross Elasticity of Demand

Question

Eastern Airlines offers coach seats on its flight from Milwaukee to New York for $250. Sales have averaged 700 per day during the last year. Eastern’s primary competitor (Continental Airlines) cut their prices from $220 to $200. The quality of travel is the same between airlines (no special cookies!). However, due to brand loyalty, the prices are not the same. Eastern Airlines witnessed a decrease in traffic from 720 to 650.

What is the arc cross elasticity of demand between Eastern’s flights and Continental’s flights

 

Summary

This question belongs to micro economics and discusses about cross elasticity of demand between products

 

Total Word Count 6

 

 

 

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